Thursday, August 9, 2012

Time running short for USPS

It was another losing quarter for the US Post Office - $5.2bn for the quarter ending in June.  How much longer can the struggling agency last? Apparently not much longer as the postmaster indicated it was low on cash and may not be able to borrow money if the US Congress did not help.

Lawmakers have stated they are committed to helping the USPS but oddly enough as they expressed their commitment, they leave town for a month long recess without reaching an agreement on postal legislation. In fact they left the same week as the USPS defaulted on a required $5.5bn prepayment to the federal government for future retiree health benefits. These prepayments have accounted for about 80% of the USPS’ losses this fiscal year. In fact, the postmaster has been constantly warning the US government that a default was imminent but sadly it appears not many folks took notice – perhaps there is more concern over getting reelected then getting actual work done is more important?

Still, the USPS has managed to make numerous cost cutting moves such as cutting operating hours, buyouts to workers and a plan to consolidate operations at 140 processing sites. Ending Saturday mail is another plan the agency has but it needs to pass the US Congress before it can be enacted. The Senate passed a bill in April to end Saturday mail however; the House of Representatives did not approve the bill but failed to produce their version before the month long recess.
Personally, I feel that ending Saturday mail is the wrong approach – this could actually be a competitive advantage for the postal service against UPS and FedEx. True, UPS and FedEx will deliver on Saturdays but for an extra charge. However, the postal service is facing such a dire situation it appears they have no choice but to reduce delivery services to five days – perhaps Wednesdays instead of Saturdays?

There were some bright spots in its quarterly earnings - although mail volume fell 3.6% to 38.5bn pieces, shipping services, package delivery grew 9% in revenue compared to the same quarter a year earlier. While email and online bill payments have hurt letter mail volumes, the USPS's shipping business has benefited from online shopping and sites like

While there are few bright spots such as package delivery, this will not be enough to maintain this archaic behemoth that is trying to modernize operations. Competing against the likes of UPS and FedEx is difficult at best in normal times and although it has partnered with both companies to provide last mile delivery for such products as UPS’ SurePost and FedEx’s SmartPost this too is not enough to sustain the postal service. Perhaps privatizing it is the answer? One thing is for sure, something needs to be done and soon. A decisive answer is needed from the US Congress instead of what appears to be ignoring the situation. There are opportunities for the postal service but sadly it appears that its hands are tied as it waits its outcome from a Congress that appears to be not really that concern.